Poundland owner Pepco Group’s third quarter sales fell below expectations as it battled with slow moving stock and a challenging transition to its new general merchandise ranges.
Poundland like-for-like sales plunged 6.9% to £404m (€480m), which it attributed to challenges related to the introduction of new Pepco-sourced clothing and general merchandise ranges, “which are being addressed”.
Across the wider Pepco group, like-for-likes fell 4.3%, however group sales rose 8% rise in group sales to £1.18bn (€1.4bn) on a constant currency basis for the three months to 30 June.
The discount chain owner opened 37 new stores during the period, which it said puts it on track to meet its 400 target this year. It closed 20 Poundland stores over the period and opened one.
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Pepco Group executive chair Andy Bond said: “We have continued to execute against our strategy to deliver more measured growth – doing less, to achieve more – with a greater focus on improving profitability.
“The improved gross margin trajectory we flagged at the half-year results has continued strongly into the third quarter, and disciplined capital investment is driving strong cash generation. In line with our strategy, we opened a lower number of net new stores in the third quarter, largely focused in our core Pepco Central and Eastern Europe markets where we are delivering the highest returns.
“Group like-for-like revenues in Q3 were below our expectations, partly due to macro factors, such as ongoing supply chain disruption, and company-specific issues, including slower-selling older stock which is being removed through markdown, as well as the transition to Pepco-sourced clothing and general merchandise in Poundland and Dealz.
“We are actively improving the availability and breadth of our ranges, and expect to benefit from these actions in the new financial year.
Despite the weaker than expected third quarter, Bond said he was confident the group would meet its guidance of delivering an EBITDA of around £758m (€900m), a 20% increase on last year.
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